Sterling, 19, is currently on £30,000-a-week, his deal expires in 2017 and Liverpool were expected to reward his progress with a new deal.

The Mirror reported in April that Sterling was in line for a new deal after his impressive form for the Reds which helped forced his way into England’s World Cup set-up. He is currently one of the smaller earners in the Liverpool set-up and his contract is dwarfed by almost all of his England team mates.

But boss Brendan Rodgers last month insisted Sterling must wait for a new deal - and that has encouraged Real Madrid.

Rodgers said last month: “When you reward young players too quickly – Raheem’s still only 19 – you give them too much too early and that will be their downfall. It’s a big problem because they lose their hunger.”

Liverpool will be anxious not to lose one of their prize assets but the contract will be a concern with big clubs hovering. Real Madrid have cash to spend after selling Angel Di Maria and they have also seen Gareth Bale become a huge success in Spain.

Welshman Bale has even encouraged Sterling to move to Madrid.

He said last week: “If you look at Raheem Sterling, I think he’s shown what a good player he is. He’s starting to perform more consistently.

“If he keeps working hard and doing what he’s doing then he’s going to keep progressing and the sky is his limit.”

Sterling played the full 120 minutes of the Reds' dramatic Capital One Cup win over Middlesbrough tonight.